Brexit, TTIP & the future of UK trade policy

If you are one of the many Friends who has been campaigning against the Transatlantic Trade & Investment partnership (TTIP) – a major trade deal being negotiated between the European Union (EU) and United States, you may well be wondering what happens next following the UK’s decision to leave the EU.

Quaker Peace & Social Witness (QPSW) staff have been asking themselves very similar questions over the last few weeks. Unfortunately, we can only say two things with any degree of confidence; in the short term there is going to be lots of uncertainty. And that in the longer term trade negotiations are going to become more not less important for the UK government.

Here’s what we know so far and what we think the implications will be for trade campaigners.

TTIP & Brexit

Given that TTIP negotiations have been going on for many years, but that the formal process for the UK’s withdrawal from the EU has not yet begun, the biggest question is probably whether the UK will actually ever be part of TTIP? This is very much an open question, the answer to which will not only depend on the timing of both sets of negotiations but also on the shape of the UK’s future trading relationship with the rest EU.

Both the EU and US trade negotiators recently reiterated that TTIP negotiations were continuing and that their aim was to complete talks by the end of 2016. However, even before the referendum result, it was widely accepted that TTIP negotiations were very much behind schedule. Brexit, combined with growing public opposition and the forthcoming US presidential elections are likely to complicate things further. As such there is a very real chance that by the time a TTIP deal is ready to be ratified, the UK will have left the EU. This almost certainly means that the opportunities for either the UK government – and by extension UK based trade campaigners – to influence TTIP negotiations are likely to be very limited.

However, this doesn’t necessarily mean that UK citizens should stop worrying about TTIP. Post Brexit, the EU and US will remain some of our largest trading partners and any deal between the two will inevitably have an impact on our economy. It’s likely that we’ll still feel pressure to ‘align’ our standards with whatever is agreed in TTIP. There’s even been speculation that the UK might ask to be able to join TTIP as a third party. What this all means for the future of the anti-TTIP campaign in Britain is very unclear.

CETA – UK ratification may go ahead

Whatever happens with TTIP, we shouldn’t forget about its sister agreement CETA (the Comprehensive Economic and Trade Agreement), a trade deal between the EU and Canada.

CETA is very similar to TTIP. QPSW is particularly worried that it includes a controversial mechanism (known as an ‘investment court system’ – or ICS) which would allow foreign companies to sue governments, if that company believes the government’s actions will damage the company’s ability to make a profit. Mechanisms like ICS found in other smaller trade deals have been used to challenge a raft of social and environmental regulations – for example Ecuador was recently forced to pay petroleum company Occidental around $1billion by under a system very similar to ICS.

CETA negotiations have already ended and the process of ratifying the deal will probably start this autumn so there is a strong chance that the UK will be part of CETA – at least until we formally exit the EU. (Although, again there are suggestions that the UK government might negotiate being part of the deal indefinitely.)

It was recently agreed that CETA would be classified by the EU as a so-called ‘mixed deal’, meaning that as well as being approved by the European Commission and Parliament, EU member states’ national parliament would have to approve the deal. For now at least then, the expectation remains that it will have to be scrutinised by the UK parliament, providing campaigners with further opportunities to take action.

Future UK trade policy

Whilst uncertainties around the UK, TTIP and CETA are likely to continue for some months, the UK government has made very clear that developing strong trading relations outside of the EU is now one of its key objectives. A new Department for International Trade has been set up to realise this ambition and although there are restrictions on what can be agreed while the UK remains a member of the EU, it is clear that the intention is to start talks with potential new trade partners as soon as possible.

This new approach presents both risks and opportunities for those of us who are working to ensure that trade agreements promote rather than diminish chances for a more equal, just and sustainable world.

The UK government is already very much pro ‘free trade’ and the risk is that continued economic uncertainty following the referendum result will see it push for further dismantling of environmental and social protections in the attempt to prove that the country is ‘open for business as usual’.

On the other hand, as Quaker Peace & Social Witness (QPSW), together with the Quaker Council for European affairs, Friends Committee on National Legislation, American Friends Service Committee and Quaker United Nations Office highlighted in our recent statement on TTIP and free trade agreements, any economic growth based on unsustainable or unjust practices is likely to be short-lived. If the UK is to develop trade relationships that underpin long term economic success, it’s vital that these promote high standards of social and environmental protection.

In the post referendum world with so many political uncertainties, this is one small, but very significant opportunity and over the next few weeks QPSW hopes to work with partners to highlight our concerns with ministers and trade officials. To this end, we recently joined with over 20 other members of the Trade Justice Movement in writing to Liam Fox, the new Secretary of State for International Trade to share some of the principles which we hope will underpin the UK’s future trade relationships.

We will be continuing to monitor UK trade policy over the coming months and hope to alert Friends and others to campaigning opportunities though our Earth and Economy e-newsletter.

I’m afraid we don’t currently have permission to reproduce the full letter. However, the issues it raised were very much in line with those highlighted in our Shared Quaker Statement on TTIP and free trade agreements. (You can see this at http://www.quaker.org.uk/trade – afraid I can’t post a link here)

One of our major concerns highlighted in the statement above is the tendency (as witnessed through TTIP, CETA and other trade deals) for trade objectives to override other international commitments such as those on social, environmental or international development issues. The letter expressed a view that this should not be the case with future UK trade policy and that the UK should not lower social and environmental standards in an attempt to gain advantage over other trade competitors. We also highlighted our longstanding concerns about Investor-State Dispute Settlement mechanisms and the need for greater transparency in and democratic accountability over any trade negotiations that the UK is party to.

The Ecuador/Occidental case is very complicated – and admittedly perhaps not the most straightforward example I could have picked to illustrate my argument about challenging social and environmental regulations.

My interpretation of the case is that to call it a simple case of ‘expropriation’ is too simplistic. It involves a dispute about whether or not the Ecuadorian governments decision to cancel Occidental’s contract for a particular oil block should have been compensated under the US-Ecuador Bilateral Investment Treaty.

The government was of the view that the company failed to seek explicit permission to sell its oil rights to a third party. The company was obliged to do this under its contact with the government, thus the government believed it was within its rights to terminate the contract. The tribunal referred to in my article agreed that Occidental had broken the law by failing to seek permission for the transfer – but it also claimed that immediate cancellation of the contract was a disproportionate response on the part of Ecuador – hence the fine.

Although portrayed as a purely economic dispute, there are potentially significant social and environmental implications. Ecuador, like many other countries, has previously suffered massive pollution as a result of poorly executed oil extraction activities so a government’s ability to ‘vet’ the suitability and track record of companies involved in such key activities is potentially an important tool in helping to minimise further pollution.

I think the bigger point here is that this case was decided by a small number of appointed lawyers outside the public courts and therefore through a process that would neither be open to individuals nor to domestic companies. I understand (although don’t accept) the argument that such processes might be needed in countries where the rule of law is weak – but the countries of the EU, US and Canada – all have highly developed legal systems so there are very real questions about why either ISDS or ICS might be justified in TTIP or CETA.

I agree that ISDS is not the most attractive feature of these mega trade deals and may well favour powerful business interests but your very helpful report on the Ecuador case prompts a couple of thoughts:
1. To what extent is the ISDS mechanism available to governments to deal with rogue companies i.e. is there equal access to the mechanism for both parties?
2. The availability of detailed information about the case undermines the assertion that the ISDS mechanism, and mega trade deals generally, are opaque or secretive. For better or worse we seem to have a full account of the Ecuador/Occidental case.

Nothing is perfect in this veil of tears but I continue to believe that mega trade deals are more of an opportunity than a threat and can help promote prosperity and good regulation. I remain disappointed that Quakers corporately takes a fixed campaigning position against them. However, I am glad you (and QCEA too) are monitoring Brexit, which I believe poses a far greater threat to Quaker values.

This blog has been set up by Quaker Peace & Social Witness (QPSW) but the views expressed on it are those of the individual contributors, and as such should not be taken to represent the position of QPSW or of the Religious Society of Friends (Quakers). Find out more about Quakers at www.quaker.org.uk/you